Hoban Construction may join the bidding war to acquire IMM Private Equity (IMM PE)-owned Taihan Electric Wire as it seeks to benefit from vertical integration.
The construction company has hired an advisory firm to prepare a bid for a controlling stake in the cable maker, industry sources said.
IMM PE started to receive preliminary offers earlier this month. Several domestic and foreign potential buyers have reportedly been showing interest in the company, with most of them private equity investors and players from adjacent industries.
The move by Hoban Construction is seen as an effort to expand into manufacturing of electric cables. The builder had expressed interest in the company in 2014 when then-bankrupt Taihan Electric Wire was put on sale by creditors, but pulled out. The company was acquired by IMM PE in 2015 for about 300 billion won ($269.4 million).
Hoban Construction has expanded its scope through mergers and acquisitions for the last two decades. In the early 2000s it acquired Sky Valley Country Club, a golf course in Gyeonggi Province, and in 2010 bought Waikele Country Club in Hawaii. Since 2015, it has focused on growing its construction business by acquiring smaller rivals such as Woobang Engineering & Construction and Ultra Construction & Engineering. In 2018 the company acquired Resom Resort to beef up its leisure business.
IMM PE reduced its stake from 71.5% to 50% in four block transactions over the last two years, probably in a bid to attract more potential buyers. The 50% stake is expected to be worth as much as 700 billion won, including a control premium, given that Taihan Electric Wire’s market capitalization is about 1 trillion won.
LS Cable & System, the largest cable manufacturer in South Korea, was in advanced talks with IMM PE to buy the company last year but withdrew, possibly because of concerns about antitrust scrutiny and the financial burden of the acquisition.
The country’s cable market is an oligopoly of three major companies, LS Cable & System, Taihan Electric Wire and Gaon Cable. LS Cable & System reported revenues of 3.24 trillion in 2019, while Taihan Electric Wire and Gaon Cable posted revenues of 1.39 trillion won and 757.1 billion won respectively.
Some observers speculate that smaller player Iljin Electric, which is relatively free from antitrust issues, may submit an offer. But it has not shown any interest so far.
Taihan Electric Wire delivered record results in 2020. Its revenue grew 3.8% year-on-year to 1.44 trillion won and operating income jumped 99% to 51.5 billion won, the largest in 11 years. (Reporting by Si-eun Park)